Mumbai: US subscriber base of Netflix and Disney+ reported growth of 5.4 per cent YoY and 0.2 per cent YoY in Q3CY23, respectively; the international segment outperformed with subscriber growth of 10.5 per cent YoY and 17.0 per cent YoY for Netflix and Disney+, respectively. Netflix continues to lead as it has a paid subscriber base of 247.2mn vs 150.2mn of Disney+. Disney+Hotstar(India and other Asia nations) paid subscribers declined for the fourth consecutive quarter, as it fell 38.7 per cent YoY; Disney+ Hotstar has lost 37 per cent of its paid subscriber base (now at 37.6 mn paid subs) over the four quarters after 1) losing Indian Premier League (IPL) digital rights and 2) offering World Cup content free of cost, which also has led to a loss in paid subscriber base over the past two months. We believe Disney+Hotstar subscriber loss has bottomed and may see mid-single digit growth over the next few quarters based on new content offerings – movies and web series slate. Netflix (US) average revenue per user (ARPU) declined 0.5 per cent YoY whereas Disney+ (US) posted ARPU growth of 23 per cent YoY (on a low base) during the quarter. In India, Disney+Hotstar was the only platform that grew 20.7 per cent YoY to USD 0.7 or Rs 58 per month on low base.
Focus on cost optimisation driving increased monetisation
Netflix’s innovative move on paid sharing has reaped rich dividends, as it has led to better subscriber growth, which was 9.4 per cent YoY (average) over the past two quarters since the introduction of this feature in May’23 ; the ad tier model too has received a positive response and can become big, led by connected TV adoption globally, as Netflix also plans to make inroads in the gaming business too. Disney+ has also seen success in the ad supported plan, as 50 per cent of new subscriber addition is on ad-supported model. Disney+ plans to reduce losses in the streaming business and has cut annual content budget by 7 per cent YoY to USD 25bn. Disney continues to evaluate strategic options for its linear TV networks while maintaining focus on cost optimisation and high-quality content delivery.
Read through for Indian OTT
Zee5, India’s larger broadcaster peer, too has focused on efficiency in its digital business, as losses narrowed marginally by 8.3 per cent YoY to Rs 2.5bn. India’s OTT market has seen a big disruption post Jio Cinema’s free offering of IPL content, which, in turn, will negatively affect subscription video on-demand (SVOD) revenue growth, as platforms may be unable to raise prices; innovative measures, such as ad-supported streaming and password-sharing initiatives may be the only levers for better monetization. Disney+Hotstar continues to look for a strategic partner, and high probability of the Z-Sony merger, we still believe India’s OTT market will see early signs of consolidation in the near to medium term, which is the only way content cost would climb down and enable platforms to move closer to break-even & profitability.
The credit of this article goes to Elara Capital SVP Karan Taurani.
